Drug Tax Frequently Asked Questions
Drug Tax Stamps
The only location you can purchase drug tax stamp(s) at is the following location:
Taxpayer Assistance Center
Scott State Office Building
120 SE 10th Avenue
Topeka, KS 66612-1103
The Taxpayer Assistance Center is open 8 a.m. to 4:45 p.m., Monday through Friday.
Only cash, money order, or a cashier's check can be used to purchase drug tax stamps. No personal checks are allowed.
Drug tax stamps can be purchased in denominations and multiples of $10, $50, $100, $500, and $1000.
The smallest denomination of tax stamp sold is $10.
There are two reasons why illegal drugs are taxed:
- Taxing the underground economy - The fact that the business of dealing marijuana and controlled substances is illegal does not exempt it from taxation. Legitimate business transactions are taxed. Dealing drugs is a large part of a previously untaxed underground economy.
- Providing a source of revenue - 25 percent of drug tax collections are allocated to the State General Fund.
An individual is classified as a drug dealer and is liable for the payment of drug taxes if he/she manufactures, produces, ships, transports or imports into Kansas or possesses:
- more than 28 grams of marijuana (processed or marijuana plants), or
- more than one gram of any controlled substance sold by weight, or
- 10 or more dosage units of a controlled substance sold by dosage units such as pills or capsules.
Drug dealers, as defined above, are required by law to purchase tax stamps from the Department of Revenue's Division of Taxation - Miscellaneous Tax (K.S.A. 79-5204). In order to protect against any possible violation of the self-incrimination constitutional protection, a dealer is not required to give his/her name or address when purchasing stamps and the department is prohibited from sharing any information relating to the purchase of drug tax stamps with law enforcement or anyone else. Payment of the drug tax (the purchase and affixation of stamps) is due immediately upon acquisition or possession by the dealer. The stamps are valid for 3 months from the date of issuance. If drugs are seized without stamps or the stamps which are affixed have expired, the possessor is liable for payment for the tax as well as a late penalty of 100 percent of the tax. For example:
Drug tax assessment: 10
grams of cocaine x $200 per gram = $2,000
Penalty: $2,000 x 100% = $2,000
Total Liability: $2,000 + $2,000 = $4,000
Pursuant to K.S.A. 79-5202, the tax rates are:
- Processed: $3.50 per gram or portion of gram
- Wet Plant: $0.40 per gram or portion of gram
- Dry Plant: $0.90 per gram or portion of gram
- Controlled Substance/gram or portion of gram: $200/gram or portion of gram
- Controlled Substance/50 dose unit or portion of unit: $2,000/50 dose unit or portion of unit
There are both criminal and civil penalties.
- Failure to pay the drug tax is a felony punishable of up to five years and/or a fine of up to $10,000.
- Failing to purchase and affix tax stamps to illegal drugs may result in the issuance of a jeopardy tax assessment and tax warrant by the Department of Revenue against the drug dealer based upon the amount of the drugs seized pursuant to K.S.A. 79-5205 and K.S.A. 79-5212. The fact that the assessment is a "jeopardy assessment" allows for the initiation of collection activities immediately. Execution of the tax warrant may involve the seizing and selling of the drug dealer's property to satisfy the drug tax liability. In other words, the drug dealer subjects his/her property to possible seizure by failing to purchase and affix the necessary drug tax stamps to the drugs. In addition, the tax warrant, once filed by the clerk of the district court, serves as a lien against the drug dealer's real estate. This prevents the drug dealer from selling his/her real estate without first satisfying the drug tax liability. Laws exempting personal property from seizure do not apply to seizure pursuant to drug tax warrants.
No. Purchasing drug tax stamps prevents criminal prosecution for the charge of failure to affix the stamps on the drugs and prevents the Department of Revenue from assessing the 100 percent penalty for possession of illegal drugs without tax stamps.
Yes. The drug dealer has 15 days from the date of assessment to request a hearing before the Designee of the Secretary of Revenue to determine the validity of the assessment pursuant to K.S.A. 79-5205. The assessment is statutorily presumed to be valid and correctly determined. The burden is on the taxpayer to prove otherwise.
The criminal prosecution for failure to pay the drug tax and the civil tax assessment are separate actions. What occurs with the criminal case, for instance, does not necessarily affect the Department of Revenue's tax assessment.
The local district or county attorney handles the criminal prosecution for failure to affix drug tax stamps. The Department of Revenue is responsible for administering the tax on illegal drugs. After receiving information from the law enforcement community, ABC represents the Director of Taxation in issuing assessment notices and tax warrants, ABC identifies assets of drug dealers for seizure to satisfy the drug tax liability.
No. Kansas was one of the first states to enact a tax on illegal drugs. There are about 20 states that continue to impose a tax on illegal drugs.
Affix the drug tax stamps to the marijuana and/or controlled substance immediately upon receiving the substance.
Drug tax stamps expire three months after the date of issuance.
No. The department sells drug tax stamps without asking for any identification, demographic information, e.g. name, social security number. Department associates cannot share any information relating to drug tax stamp purchases with anyone, including law enforcement agencies.
Yes. The purchaser will need to provide their mailing address in order for the Department to send the drug tax stamps.
DRUG TAX LEGAL QUESTIONS
The factors in the drug tax statutes governing whether the drug tax applies are somewhat different than the criminal statutes. Whether a drug tax is assessed is not dependent upon whether a criminal charge is filed or whether there is a conviction. If a person is found in possession of unstamped, illegal drugs, a tax assessment may be made against them.
The county or district attorney was talking about reducing the counts against you in the criminal case. He does not have authority over whether you are liable for the drug tax since it is a separate civil matter under the authority of the Kansas Department of Revenue.
If you file a timely appeal of the tax assessment, we will review the facts in the police report and respond to your appeal. Appeals must be received in our office within 15 days of the assessment. If you failed to submit an appeal of the assessment within the 15 days, you may request a compromise by sending a letter or calling the ABC office.
Without your written permission, state tax laws prohibit Kansas Department of Revenue employees from talking to anyone but you about your case.
Once the debt has been satisfied, a Satisfaction of Judgment will be mailed to your last known address in our file. You must file this form with the District Court Clerk in the county where the assessment was filed and request a file stamped copy of it for your personal records or future needs. The clerk will charge a fee to file the form and obtain a copy. The credit bureaus obtain updates of tax debts on file from the district courts, so your credit report may be updated once that happens. If needed sooner, contact the respective credit bureau for instructions on how to get this resolved on your credit report.
There is no set amount. A committee reviews a summary of all offers, which includes income, expenses, life changes and other pertinent information and will make a decision. You will be notified of that decision in writing unless a telephone or email response is requested.
The amount listed is the collective amount for all that were assessed for those particular drugs. Each individual has the right to request reduction of the amount owed either through the appeal process or the compromise process. If one person is approved for debt reduction, it is only for that specific person. The remainder of those assessed for those drugs are responsible for the balance of the debt unless they also submit a request and are approved for a reduction through the appeal or compromise process.
That is not true. Appeal settlements or compromises are made on an individual basis through the appeal or compromise process.
The Kansas Department of Revenue does not communicate with credit bureaus; instead, credit bureaus obtain their information from District Court Records. We do not update the District Court Records after each payment.
We do not have to prove that the personal property was bought with drug money. State statutes allow us to seize any property you own to satisfy your drug tax debt. If another person is claiming ownership of property seized from you, they may submit proof of ownership of the seized property. A decision will be made by the committee and you will be notified of that decision in writing, unless a telephone or email response is requested.
No, a civil tax warrant is not the same as an arrest warrant.
When you didn’t make the payments as set forth in the settlement agreement, the settlement agreement defaulted to the full balance of the assessment. You must submit a completed Financial Statement and Petition and request that the committee review and approve restoration of the original settlement amount.
The definition of a “dealer” for purposes of drug tax is not the same as with the criminal law. It is based upon the quantity of drugs possessed.
Auction of Seized Property
Yes, anyone can bid on any item on the auction list.
There is nothing in the law to prohibit that.
After auction expenses are deducted, the remainder of the money will be applied to the taxpayer’s debt.
Not unless, prior to the auction, an appeal settlement or compromise agreement was reached with that condition. If not, you would be responsible for paying the remainder of the debt.